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26th Aug 2019

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Is China picking off individual EU members?

  • Investments in Hungary have failed to materialise (Photo: dolmansaxlil)

Lately EU integration seems to have become a wrestling match between those member states large enough to impose conditionality on their partners and those member states large enough to escape this interference. No wonder small and peripheral members are feeling trampled upon.

They can be forgiven for looking for a less onerous form of co-operation. In particular, those member states obliged to accept the harsh conditions attached to the EU’'s financial support seem to be looking to the east, waiting expectantly for a dollop of investment as well as preferential credits.

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In so doing, they are ignoring accusations that China's interest in engaging with individual EU members is not the selfless behavior of a power with too much cash on its hands, but that China is looking to disrupt the progress of EU integration and the consolidation of a rival power.

Concerns in Brussels focus particularly on Hungary.

Budapest is angry at the EU's criticism of its constitutional and financial reforms - reforms it claims to be carrying out in pursuit of German-style institutional discipline – and it is peeved by the European Commission's apparent double standards as regards the consolidation of Hungarian finances.

That the center-right Fidesz government should pick up where its left-wing predecessor left off in pursuing close and friendly relations with Communist China is surprising.

It was, after all a young democratic activist named Victor Orban, the Fidesz Prime Minister, who in 1989 organised a public protest in Budapest against the Tiananmen Square massacre.

During Orban's first term as Prime Minister, in 1998-2002, the two countries did admittedly sign a common declaration on friendly relations.

But in the same year, the Hungarian consulate in Shanghai was closed, and Orban held a meeting with the Dalai Lama. This distinctly unfriendly behavior was typical of the dissident roots of many centre-right movements in central Europe.

Lack of cash can have a remarkably liberating effect when it comes to political principles, however.

Two months after his landslide victory in the 2010 elections, the newly re-elected Orban ended loan-extension talks with the International Monetary Fund (IMF) and the EU. Orban, who had effectively deprived himself of funds from the West, looked to China to provide a short cut to economic recovery.

His logic was impeccable: in the period 2004-2010, previous Hungarian governments had reaped the economic benefits of good relations with China.

And yet, Orban's gamble has not played out as he expected. Despite praising Chinese leaders for their "loyalty to a few principles, which we here in the West have turned our backs on in recent times," he has not received much in return.

According to unofficial Chinese statistics, the last two years have seen China invest around $2-2.5 billion in Hungary. But half of it ($1,25 billion) came from just one company - Wanhua Industrial Group - which in February 2011 acquired full control of chemical producer BorsodChem.

Twice Chinese leaders promised to provide Hungary with a loan for development projects, and twice the money has failed to materialise.

Beijing has also refused to join major Hungarian infrastructure projects as well as turning down the opportunity to help the airline Malev, bankrupted in the wake of an EU competition law case.

The reason for this coolness? Orban's confrontational policy towards Western organizations coupled with his distrust of markets. The Chinese deputy minister of foreign affairs, Song Tao, who paid a visit to Budapest in April 2012, has said as much.

He stated in public and in front of Orban that it is always preferable to have a partner who is predictable and stable.

In short, the pattern of China's relations with Hungary suggests Beijing is not in fact interested in becoming an alternative pole of attraction for needy and dissident EU states.

It is precisely a member state's sound finances and commitment to regional integration that make it attractive, or not, to China.

In the Chinese strategy towards the EU, of which only the contours are yet clear, central Europe looks set to play a significant role.

According to Wen Jiabao, the region will become a "Chinese gateway." And, following the restart of negotiations with the IMF, Hungary may soon become a more predictable and attractive partner.

Tellingly though, it was not Hungary but Poland, a country much more committed to regional intergation than to biateralism with China, with whom the Middle Kingdom in January 2012 signed an agreement on "strategic partership."

Dariusz Kalan is central Europe analyst at the Polish Institute of International Affairs (Pism) in Warsaw

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